Financial Accounting (Waybright) Chapter 2 Analyzing … 2 Analyzing and Recording Business...

Chapter 2 Test Item File Waybright/Chen/Pyper, Financial Accounting, Ce

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Copyright © 2013 Pearson Canada Inc.

Financial Accounting (Waybright)

Chapter 2 Analyzing and Recording Business Transactions

2.1 Define accounts and understand how they are used in accounting

1) A listing of all accounts in numerical order is called a chart of accounts.

Answer: TRUE

Diff: 1 Type: TF

LO: 2-1 Define accounts and understand how they are used in accounting

Skills: Recall

Blooms: Knowledge

CFALO: A-2 Describe the components of and prepare the four basic financial statements

2) Account titles such as marketing expense and depreciation expense would be numbered starting with a 3.

Answer: FALSE

Diff: 1 Type: TF


Skills: Recall

Blooms: Knowledge


3) An account numbered 321 would be considered a shareholders' equity account as it begins with a 3.

Answer: TRUE

Diff: 1 Type: TF


Skills: Recall

Blooms: Knowledge


4) Items of value that a company owns are called shareholders' equity.

Answer: FALSE

Diff: 1 Type: TF


Skills: Recall

Blooms: Knowledge

CFALO: A-1 Identify and apply accounting concepts and principles found in the Conceptual Framework

5) The shareholders' equity section would include the accounts such as retained earnings and revenues.

Answer: TRUE

Diff: 1 Type: TF


Skills: Recall

Blooms: Knowledge



2


6) Which is part of shareholders' equity?

A) Cash

B) Notes Payable

C) Dividends

D) Assets

E) Liabilities

Answer: C

Diff: 1 Type: MC


Skills: Recall

Blooms: Knowledge


7) Dividends are paid with cash to shareholders. Dividends are in what category of the chart of accounts?

A) Revenue

B) Assets

C) Shareholders' Equity

D) Liabilities

E) Revenue

Answer: C

Diff: 2 Type: MC


Skills: Recall

Blooms: Knowledge


8) Dividends, revenues, and expenses all:

A) start with the same chart of accounts number.

B) start with different chart of accounts numbers.

C) appear in the chart of accounts under assets.

D) appear in the chart of accounts under liabilities.

E) do not appear in the chart of accounts.

Answer: B

Diff: 1 Type: MC


Skills: Recall

Blooms: Knowledge



3


9) Which of the following would start with a 1 in the chart of accounts?

A) Land and buildings

B) Depreciation expense and marketing expense

C) Merchandise sales and rent revenue

D) Common shares and cash

E) Accounts Payable and Notes Payable

Answer: A

Diff: 1 Type: MC


Skills: Recall

Blooms: Knowledge


10) Which of the following would start with a 2 in the chart of accounts?

A) Income taxes to be paid and wages to be paid

B) Common shares and preferred shares

C) Cash and accounts receivable

D) Sales and fees revenue

E) Marketing expense and rent expense

Answer: A

Diff: 1 Type: MC


Skills: Recall

Blooms: Knowledge


11) A chart of accounts includes:

A) balances of accounts.

B) names of customers

C) assets and liabilities.

D) accounts with unusual balances.

E) account activity.

F) vendor account balances.

Answer: C

Diff: 1 Type: MC


Skills: Recall

Blooms: Knowledge



4


12) Which of the following is an expense account?

A) Prepaid insurance

B) Advertising

C) Accounts payable

D) Cash

E) Notes payable

Answer: B

Diff: 1 Type: MC


Skills: Recall

Blooms: Knowledge


13) Which of the following is a revenue account?

A) Professional fees

B) Accounts Payable

C) Accounts Receivable

D) Wages

E) Cash

Answer: A

Diff: 1 Type: MC


Skills: Recall

Blooms: Knowledge


14) Marketing expenditures account 511 would belong to what category of accounts?

Answer: Expenses

Diff: 1 Type: SA


Skills: Recall

Blooms: Knowledge


15) Monies owed to a company on a written promise to pay a fixed amount of money by a certain date would be

called a __________.

Answer: note payable

Diff: 2 Type: SA


Skills: Recall

Blooms: Knowledge


16) Accounts starting with the number 4 would typically represent __________.

Answer: revenues

Diff: 1 Type: SA


Skills: Recall


5


Blooms: Knowledge


17) An account starting with a number 1 would indicate __________.

Answer: an asset

Diff: 1 Type: SA


Skills: Recall

Blooms: Knowledge


18) Accounts that start with the numbers 6-9 would probably be __________.

Answer: other revenues and expenses

Diff: 1 Type: SA


Skills: Recall

Blooms: Knowledge


19) The order in which accounts appear in the chart of accounts is: __________.

Answer: assets, liabilities, shareholders' equity, revenues, expenses

Diff: 1 Type: SA


Skills: Recall

Blooms: Knowledge


20) Items such as wages and interest that have been incurred, but not yet paid, are called __________.

Answer: accrued liabilities

Diff: 1 Type: SA


Skills: Recall

Blooms: Knowledge


21) Obligations that are owed to others due to past transactions are categorized as __________.

Answer: liabilities

Diff: 1 Type: SA


Skills: Recall

Blooms: Knowledge


22) All payables are listed as __________.

Answer: liabilities

Diff: 1 Type: SA


Skills: Recall

Blooms: Knowledge



6


23) A type of company asset in which a customer owes the company money would be a __________.

Answer: receivable

Diff: 1 Type: SA


Skills: Recall

Blooms: Knowledge


24) Land, cash, office equipment, and accounts receivable belong to what category of accounts?

Answer: Assets

Diff: 1 Type: SA


Skills: Recall

Blooms: Knowledge


25) A promissory note owed to another company would most likely appear in which categories?

Answer: Notes payable

Diff: 1 Type: SA


Skills: Recall

Blooms: Knowledge


26) List the order in which each of the following accounts would appear in a chart of accounts.

Utilities expenses, Tax return revenue, Accounts receivable, Income taxes payable

Answer: Accounts receivable, Income tax payable, Tax return revenue, Utilities expenses

Diff: 2 Type: SA


Skills: Application

Blooms: Application


27) Expenses paid in advance such as rent and insurance are classified as prepaid expenses. Into what category

are they placed?

Answer: Assets

Diff: 2 Type: SA


Skills: Application

Blooms: Application



7


28) Payment of a telephone bill represents a(n) __________.

Answer: expense

Diff: 2 Type: SA


Skills: Application

Blooms: Application


29) Obligations owed by a company to banks, for instance, are called __________.

Answer: notes payable

Diff: 2 Type: SA


Skills: Application

Blooms: Application


30) Net income and dividends are part of __________.

Answer: shareholders' equity

Diff: 1 Type: SA


Skills: Recall

Blooms: Knowledge


31) Review the transactions below and determine whether you would use a debit or a credit to record the

following changes. Indicate your decision by entering "Debit" or "Credit" in the right-hand column.

1. An increase in Wage Expense.

2. A decrease in Notes Payable.

3. An increase in Prepaid Insurance.

4. An increase in Common Shares.

5. A decrease in Office Supplies.

6. An increase in Dividends.

7. An increase in Revenue.

8. A decrease in Notes Receivable.

9. An increase in Advertising Expense.

10. A decrease in Cash.

Answer:

1. An increase in Wage Expense. Debit

2. A decrease in Notes Payable. Debit

3. An increase in Prepaid Insurance. Debit

4. An increase in Common Shares. Credit

5. A decrease in Office Supplies. Credit

6. An increase in Dividends. Debit

7. An increase in Revenue. Credit

8. A decrease in Notes Receivable. Credit

9. An increase in Advertising Expense. Debit

10. A decrease in Cash. Credit


8


Diff: 3 Type: ES

LO: 2-2 Explain debits, credits and the double entry system of accounting

Skills: Critical Thinking

Blooms: Analysis

CFALO: A-3 Analyze and record transactions and their effects on the financial statements

32) For the following general ledger accounts, identify the normal balance of the account.

Example: Accounts Payable Credit

Accounts Receivable

Building

Cash

Common Shares

Dividends

Equipment

Inventory

Land

Notes Payable

Office Equipment

Office Supplies

Rental Expense

Service Revenue

Travel Expense

Utilities Expense

Wages Expense

Answer:

Accounts Payable Credit

Accounts Receivable Debit

Building Debit

Cash Debit

Common Shares Credit

Dividends Debit

Equipment Debit

Inventory Debit

Land Debit

Notes Payable Credit

Office Equipment Debit

Office Supplies Debit

Rental Expense Debit

Service Revenue Credit

Travel Expense Debit

Utilities Expense Debit

Wages Expense Debit


9


Diff: 2 Type: ES


Skills: Concept

Blooms: Comprehension


33) For the accounts listed below, identify the type of account. Is it an (A) Asset, (L) Liability, (S) Shareholders

equity, (R) Revenue, or (E) Expense.

Accounts Payable

Accounts Receivable

Building

Cash

Common Shares

Dividends

Equipment

Inventory

Land

Notes Payable

Office Equipment

Office Supplies

Rental Expense

Service Revenue

Travel Expense

Utilities Expense

Wages Expense

Answer:

Accounts Payable L

Accounts Receivable A

Building A

Cash A

Common Shares S

Dividends S

Equipment A

Inventory A

Land A

Notes Payable L

Office Equipment A

Office Supplies A

Rental Expense E

Service Revenue R

Travel Expense E

Utilities Expense E

Wages Expense E


10


Diff: 2 Type: ES


Skills: Concept



34) For the accounts listed below, determine the normal balance of the account is it a debit or credit.

Normal Balance

Accounts Debit or Credit

1. Revenue

2. Cash

3. Accounts Receivable

4. Accounts Payable

5. Retained Earnings

6. Prepaid Insurance

7. Insurance Expense

8. Wages Expense

9. Office Building

10. Notes Receivable

11. Sales

12. Common Shares

Answer:

Normal Balance

Accounts Debit or Credit

1. Revenue Credit

2. Cash Debit

3. Accounts Receivable Debit

4. Accounts Payable Credit

5. Retained Earnings Credit

6. Prepaid Insurance Debit

7. Insurance Expense Debit

8. Wages Expense Debit

9. Office Building Debit

10. Notes Receivable Debit

11. Sales Credit

12. Common Shares Credit

Diff: 3 Type: ES



Blooms: Analysis



11


2.2 Explain debits, credits, and the double entry system of accounting

1) Double-entry accounting requires that every business transaction impacts at least two different accounts.

Answer: TRUE

Diff: 1 Type: TF


Skills: Recall

Blooms: Knowledge


2) The debit (left) side of an account always indicates an increase in the value of the account.

Answer: FALSE

Diff: 1 Type: TF


Skills: Recall

Blooms: Knowledge


3) A T-account is a way to visualize the increases and decreases to the value of an account.

Answer: TRUE

Diff: 1 Type: TF


Skills: Recall

Blooms: Knowledge


4) Accounts that decrease on the credit side are liabilities, common shares, revenues, and retained earnings.

Answer: FALSE

Diff: 1 Type: TF


Skills: Recall

Blooms: Knowledge


5) The credit (right) side of an account shows an increase or decrease depending upon the type of account.

Answer: TRUE

Diff: 1 Type: TF


Skills: Recall

Blooms: Knowledge


6) Accounts that increase on the credit side are assets, dividends, and expenses.

Answer: FALSE

Diff: 1 Type: TF


Skills: Recall

Blooms: Knowledge



12


7) Normal balance refers to the positive increase of an account and identifies the side of the account (Debit or

Credit) to which this positive balance is recorded.

Answer: TRUE

Diff: 1 Type: TF


Skills: Recall

Blooms: Knowledge


8) Which of the following is an unofficial tool of accounting?

A) Account

B) T-account

C) Debit

D) Credit

E) Accountant

Answer: B

Diff: 1 Type: MC


Skills: Recall

Blooms: Knowledge


9) Accounts payable, taxes payable, and notes payable increase on the debit side and decrease on the credit side.

Answer: FALSE

Diff: 2 Type: TF


Skills: Recall

Blooms: Knowledge


10) The T-account aids in separating:

A) increases and decreases in an account.

B) the equality of the credits.

C) the equality of debits and credits in the accounting equation.

D) the balances of all of the accounts.

E) errors and omissions.

Answer: A

Diff: 1 Type: MC


Skills: Recall

Blooms: Knowledge



13


11) Credit means:

A) decrease.

B) increase.

C) the right side of an account.

D) the left side of an account.

E) the total of the T-account.

Answer: C

Diff: 1 Type: MC


Skills: Recall

Blooms: Knowledge


12) An example of accounts with normal debit balances would be:

A) liabilities.

B) expenses.

C) revenues.

D) shareholders' equity.

E) retained earnings

Answer: B

Diff: 1 Type: MC


Skills: Recall

Blooms: Knowledge


13) An example of accounts with normal credit balances would be:

A) revenues.

B) assets.

C) expenses.

D) dividends.

E) accounts receivable.

Answer: A

Diff: 1 Type: MC


Skills: Recall

Blooms: Knowledge



14


14) The difference between the total debits and total credits of an account is called a:

A) trial balance.

B) sub-total.

C) ruling.

D) balance.

E) normal balance.

Answer: D

Diff: 1 Type: MC


Skills: Recall

Blooms: Knowledge


15) The fact that each transaction has a dual effect on the accounting equation provides the basis for what is

called:

A) single-entry accounting.

B) double-entry accounting.

C) compound-entry accounting.

D) multiple-entry accounting.

E) re-allocation of accounting.

Answer: B

Diff: 1 Type: MC


Skills: Recall

Blooms: Knowledge


16) Debit means:

A) decrease.

B) increase.

C) the right side of an account.

D) the left side of an account.

E) the total of the T-account.

Answer: D

Diff: 1 Type: MC


Skills: Recall

Blooms: Knowledge



15


17) A T-account has a $759 debit balance. This account is most likely:

A) accounts payable.

B) sales revenue.

C) accounts receivable.

D) common share.

E) notes payable.

Answer: C

Diff: 2 Type: MC


Skills: Application

Blooms: Application


18) A T-account has a $509 credit balance. This account is most likely:

A) common shares.

B) land.

C) advertising expense.

D) dividends.

E) cash.

Answer: A

Diff: 2 Type: MC


Skills: Application

Blooms: Application



A) income taxes payable.

B) common shares.

C) cash.

D) magazine sales.

E) sales revenue.

Answer: C

Diff: 2 Type: MC


Skills: Application

Blooms: Application



16



A) accounts receivable.

B) bicycle repairs revenue.

C) wages payable.

D) common shares.

E) service fees.

Answer: A

Diff: 2 Type: MC


Skills: Application

Blooms: Application


21) A T-account has a $922 credit balance. This account is most likely:

A) office equipment.

B) rent expense.

C) dividends.

D) sales revenue.

E) cash.

Answer: D

Diff: 2 Type: MC


Skills: Application

Blooms: Application


22) An investment of cash in a business increases which account?

Answer: Increases cash

Diff: 2 Type: ES


Skills: Application

Blooms: Application


23) Name the three major parts of a T-account.

Answer:

1. A title

2. A debit side

3. A credit side

Account Title ( Name)

|

Debit | Credit

|

Diff: 2 Type: ES


Skills: Concept


17




24) What is the normal account balance for revenue, accounts receivable, and common shares?

Answer: credit, debit, and credit, respectively.

Diff: 1 Type: ES


Skills: Recall

Blooms: Knowledge


25) Office furniture, wages payable, and dividends have normal balances of __________, __________, and

__________, respectively.

Answer: debit, credit, and debit

Diff: 1 Type: SA


Skills: Recall

Blooms: Knowledge


26) The retained earnings accounts of dividends, revenues, and expenses have normal balances of __________,

__________, and __________, respectively.


Diff: 1 Type: SA


Skills: Recall

Blooms: Knowledge


27) The total amount of debits must equal the total amount of credits. This is a rule of __________.

Answer: double-entry accounting.

Diff: 1 Type: SA


Skills: Recall

Blooms: Knowledge


28) Cash, common shares, and advertising expense have normal balances of __________, __________, and



Diff: 2 Type: SA


Skills: Concept




18


29) Dividends, accounts receivable, and buildings have normal balances of __________, __________, and


Answer: debit, debit, and debit

Diff: 2 Type: SA


Skills: Concept



30) The sunglasses Hut pays wages in the amount of $13,579. Provide the transaction details.

Answer: Debits Wages Expense 13,579

Credit Cash $13,579

Diff: 2 Type: SA


Skills: Concept



31) Freddy’s Fir Tree Company is a new business. The following accounts are required in the general ledger.

Accounts Payable Accounts Receivable

Cash Prepaid Rent

Equipment Rent Expense

Sales /Revenue Salary Expense

Insurance Expense Salaries Payable

Retained Earnings Supplies

Prepaid Insurance Supplies Expense

Organize the accounts into the order in which they should appear in the general ledger of Freddy’s Fir Tree

Company and assign account numbers.

Use the following system to assign account numbers.

1000–1999 Assets

2000–2999 Liabilities

3000–3999 Shareholder’s equity account

4000–4999 Revenues

5000–5999 Expenses

Answer: There are several possible correct account numbers. The first digit needs to align with the assigned

account numbers. The order of the accounts is important.

1001- Cash

1012- Accounts Receivable

1013- Supplies

1014- Prepaid Insurance

1015- Prepaid Rent

1060- Equipment

2010- Accounts Payable


19


2020- Salaries Payable

3010- Retained Earnings

4010- Sales Revenue

5010- Salary Expense

5020- Supplies Expense

5030- Rent Expense

5040- Insurance Expense

Diff: 3 Type: ES


Skills: Application

Blooms: Application


2.3 Demonstrate the use of the general journal and the general ledger to record business transactions

1) The general journal was developed to organize transactions by account.

Answer: FALSE

Diff: 1 Type: TF

LO: 2-3 Demonstrate the use of the general journal and the general ledger to record business transactions

Skills: Recall

Blooms: Knowledge


2) The posting reference column of the general ledger shows the sources of the transferred information.

Answer: TRUE

Diff: 1 Type: TF


Skills: Recall

Blooms: Knowledge


3) The general journal is used to record only the revenue transactions of a business.

Answer: FALSE

Diff: 1 Type: TF


Skills: Recall

Blooms: Knowledge


4) The act of recording a transaction is called "journalizing".

Answer: TRUE

Diff: 1 Type: TF


Skills: Recall

Blooms: Knowledge



20


5) Journalizing is the transfer of information from the general journal to the general ledger.

Answer: FALSE

Diff: 1 Type: TF


Skills: Recall

Blooms: Knowledge


6) The posting reference column of the general journal will include the number of the account to which the

information is being posted.

Answer: TRUE

Diff: 1 Type: TF


Skills: Recall

Blooms: Knowledge


7) Transactions are recorded in order of the dollar amount of the transaction.

Answer: FALSE

Diff: 1 Type: TF


Skills: Recall

Blooms: Knowledge


8) Chronological order dictates the order in which transactions are journalized.

Answer: TRUE

Diff: 1 Type: TF


Skills: Recall

Blooms: Knowledge


9) Once you post the transaction to the general ledger, you must go back to the general journal and fill in:

A) the date.

B) the amount debited or credited.

C) the posting reference column with the account number of the posting.

D) the account name that was involved in the transaction.

E) the dollar value.

Answer: C

Diff: 1 Type: MC


Skills: Concept




21


10) Instead of T-accounts, businesses more than likely use a:

A) chart of accounts.

B) balance sheet.

C) general ledger.

D) general journal.

E) income statement.

Answer: C

Diff: 1 Type: MC


Skills: Concept



11) The posting reference column of the general journal provides a cross-reference between the:

A) ledger and accounts.

B) journal and ledger.

C) ledger and financial statements.

D) journal and financial statements.

E) ledger and customers.

Answer: B

Diff: 2 Type: MC


Skills: Concept



12) Every entry in the general journal should include all of the following EXCEPT:

A) the title of each account affected.

B) the amounts of debits and credits.

C) a brief description of the transaction.

D) the balance of the accounts affected.

E) debits and credits.

Answer: D

Diff: 2 Type: MC


Skills: Concept



13) The general ledger is arranged in the __________order of the chart of accounts.

Answer: numerical

Diff: 1 Type: SA


Skills: Recall

Blooms: Knowledge



22


14) The __________ indicates where the information originated and to where the information was transferred.

Answer: posting reference

Diff: 1 Type: SA


Skills: Recall

Blooms: Knowledge


15) The __________ keeps a running balance of an individual account.

Answer: general ledger

Diff: 1 Type: SA


Skills: Recall

Blooms: Knowledge


16) Jill invested $25,000 in her business, Fashion, Unlimited. The journal entry would include a __________.

Answer: debit to cash for $25,000 and a credit to common shares for $25,000

Diff: 2 Type: ES


Skills: Application

Blooms: Application


17) Office equipment was purchased for $2,400 on account to Business Furniture Company. The journal entry

would include a __________.

Answer: debit to office equipment $2,400 and a credit to accounts payable $2,400

Diff: 2 Type: ES


Skills: Application

Blooms: Application


18) Salary expenses of $675 were paid in cash. The journal entry would include a __________.

Answer: debit to salary expense $675 and a credit to cash $675

Diff: 2 Type: ES


Skills: Application

Blooms: Application


19) ABC Corporation collected $600 from one of its customers for payment on their account. The journal entry

would include a __________.

Answer: debit to cash $600 and a credit to accounts receivable $600

Diff: 2 Type: ES


Skills: Application

Blooms: Application



23


20) ABC Corporation purchases a building for $35,000 cash. The journal entry would include a __________.

Answer: debit to building $35,000 and a credit to cash $35,000

Diff: 2 Type: ES


Skills: Application

Blooms: Application


21) Toys, Inc. paid one of its creditors $678 on their balance due. The journal entry would require a

__________.

Answer: debit to accounts payable $678 and credit to cash $678

Diff: 2 Type: ES


Skills: Application

Blooms: Application


22) Tonga Corporation purchased $350 of office supplies on account and treated the supplies as a prepaid

expense. The journal entry would require a __________.

Answer: debit to office supplies $350 and a credit to accounts payable $350

Diff: 2 Type: ES


Skills: Application

Blooms: Application


23) Casey Corporation purchased a $600 two-year insurance policy for cash. The journal entry would require a

__________.

Answer: debit to prepaid insurance $600 and a credit to cash $600

Diff: 2 Type: ES


Skills: Application

Blooms: Application


24) Brandon Company sold season tickets for $700 on account. The journal entry would be to __________.

Answer: debit accounts receivable $700 and credit season ticket sales revenue $700

Diff: 2 Type: ES


Skills: Application

Blooms: Application



24


25) One of the customers of Amanda Company paid $223 on her bill. The journal entry that Amanda Company

would record is __________.

Answer: debit cash $223 and credit accounts receivable $223

Diff: 2 Type: ES


Skills: Application

Blooms: Application


26) The account "Cash" had the following changes: increase of $250, decrease of $75, increase of $113, and a

decrease of $35. The final balance is a __________.

Answer: debit balance of $253.

Calculation:

+$250 - $75 + $113 - $35 = $253

Diff: 2 Type: ES


Skills: Application

Blooms: Application


27) Given the following general ledger template, identify the parts of the ledger.

Account Cash Account Number 111

A B C D E F G

Answer: A-date; B- item; C-posting reference; D-debit amount of transaction; E-credit amount of transaction;

F-debit balance of the account; G-credit balance of the account

Diff: 2 Type: ES


Skills: Application

Blooms: Application


28) The account "Notes Payable" had the following changes: increase of $500, increase of $200, decrease of

$550, and an increase of $250. The final balance is a __________.

Answer: credit balance of $400.

Calculation:

Credit $500 + Credit $200 - Debit $550 + Credit $250 = Credit $400

Diff: 3 Type: ES



Blooms: Analysis



25


29) Journalize the following transactions. You may leave out the explanations and disregard the posting

reference.

A. Paul invested $33,000 into his company, Paul’s Sports, on January 9.

B. The company purchased $6,300 of furniture on account on February 14.

C. The company paid three month’s rent of $4,500 and recorded it as a prepaid expense on February 22.

D. The company bought $5,300 of office desks and $9,000 of computer equipment for $14,300 cash

on March 9.

E. The company incurred $1400 of wages to be paid next week. This entry is to be dated March 19.

Answer:

DATE ACCOUNT/DESCRIPTION PR DEBIT CREDIT

1/9 Cash 33,000

Common Shares 33,000

2/14 Furniture 6,300

Accounts Payable 6,300

2/22 Prepaid Rent 4,500

Cash 4,500

3/9 Office Desks 5,300

Computer Equipment 9,000

Cash 14,300

3/19 Wages Expense 1,400

Wages Payable 1,400

Diff: 3 Type: ES

LO: 1-4, 2-3


Blooms: Analysis



26


30) Using the accounts below, determine the accounts to be debited and credited for each of the transactions

below.

Accounts

Cash

Dividends

Supplies

Revenue

Machinery

Salaries Payable

Accounts Payable

Salaries Expense

Retained Earnings

Accounts Receivable

Wages Expense

Transactions

1. Paid wages for cash.

2. Purchased equipment for cash.

3. Earned revenue on account.

4. Purchased supplies on account.

5. Paid for supplies purchased in 4.

6. Received payment from customer in 3.

7. Paid employee salaries.

8. Purchased machinery on credit.

9. Paid dividends to shareholders.

Answer:

Debit Credit

1. Wages Expense Cash

2. Equipment Cash

3. Accounts

Receivable Revenue

4. Supplies Accounts Payable

5. Accounts Payable Cash

6. Cash Accounts Receivable

7. Salaries Expense Cash

8. Machinery Accounts Payable

9. Dividends Cash

Diff: 3 Type: ES


Skills: Concept




27


31) Prepare general journal entries for the following business transactions

Identify each transaction by date. Explanations and posting reference are not required.

Dec 1. Received $35,000 cash for issuing common shares.

2. Purchased machinery for $50,000, paying $15,000 in cash and giving

a note payable for the remainder.

10. Paid $3,000 for a one-year insurance policy.

11. Billed customers for $21,500 of services provided on account.

15. Paid monthly rent of $2,500.

16. Performed $17,000 of services and immediately received $7,000 cash.

22. Hired an administrative assistant. Weekly wages are $750 per week.

25. Collected $8,000 from customers on account.

31. Paid the administrative assistant the first week’s salary.

Answer:

Dec. 1 Cash 35,000


2 Machinery 50,000

Cash 15,000

Note Payable 35,000

10 Prepaid Insurance 3,000

Cash 3,000

11 Accounts Receivable 21,500

Service Revenue 21,500

15 Rent Expense 2,500

Cash 2,500

16 Cash 7,000

Accounts Receivable 10,000


22 No entry required for

administrative

assistant hire

25 Cash 8,000


30 Wage Expense 750

Cash 750


28


Diff: 3 Type: ES


Skills: Application

Blooms: Analysis


32) Given the following accounts, identify which account(s), by letter, would be debited or credited for the

following transactions.

A. Cash

B. Accounts Receivable

C. Supplies

D. Computer Equipment

E. Accounts Payable

F. Fees Revenue

G. Marketing Expense

H. Salaries Expense

I. Internet Expense

J. Office Equipment

K. Common Shares

L. Rent Expense

1. Purchased supplies on account.

2. Purchased computer equipment for cash.

3. Earned revenue from doing tax returns on account.

4. Paid this month’s rent.

5. Paid a bill due on account.

6. Collected payment from a customer.

7. Invested additional cash into the business.

8. Paid the marketing bill.

9. Earned revenue from doing tax returns for cash.

10. Paid salaries in cash.

11. Purchased office equipment on account.

Answer:

1. Debit C; Credit E

2. Debit D; Credit A

3. Debit B; Credit F

4. Debit L; Credit A

5. Debit E; Credit A

6. Debit A; Credit B

7. Debit A; Credit K

8. Debit G; Credit A

9. Debit A; Credit F

10. Debit H; Credit A

11. Debit J; Credit E


29


Diff: 3 Type: ES



Blooms: Analysis


33) Journalize the following transactions. You may omit the explanations and disregard the posting

reference.

A. Rick invested $21,500 into his company, Rick’s Fishing, on January 11.

B. The company purchased $2,900 of furniture for cash on February 3.

C. The company paid three month’s rent of $2250 and recorded it as a prepaid expense on February 9.

D. The company bought $2,300 of office fixtures and $6,200 of stock bins for $7,000 cash and the balance

on account dated March 9.

E. The company receives payment of $575 of from a customer on her bill. This transaction was on

March 12.

Answer:


1/11 Cash 21,500


2/3 Furniture 2,900

Cash 2,900


Cash 2,250

3/9 Office Fixtures 2,300

Stock Bins 6,200

Cash 7,000


3/12 Cash 575

Accounts Receivable 575

Diff: 3 Type: ES



Blooms: Analysis



30


34) Journalize the following business transactions in general journal form. Identify each transaction by date.

Explanations are not required.

Dec 2. Purchased $400 of photography supplies on credit.

3. Purchased photography equipment for $6,000, paying $2,500 in cash

and signing a 30-day, $3,500 note payable.

4. Sales billed to clients amounted to $4,000.

5. Paid $700 in cash for the current months rent.

6. Paid $200 cash on account for supplies purchased on December 2.

7. Received a bill for $500 for advertising for the current month.

8. Paid $2,200 cash for photographer's assistant salary.

9. Received a cheque for $3,000 from a client in payment on account

for December 4th billing.

Answer:


Dec. 2 Photography Supplies 400

Accounts Payable 400

Dec. 3 Photography Equipment 6,000

Cash 2,500

Notes Payable 3,500

Dec. 4 Accounts Receivable 4,000

Sales/ Revenue 4,000

Dec. 5 Rent Expense 700

Cash 700

Dec. 6 Accounts Payable 200

Cash 200

Dec. 7 Advertising Expense 500


Dec. 8 Salaries Expense 2,200

Cash 2,200

Dec. 9 Cash 3,000


Diff: 3 Type: ES



Blooms: Analysis



31


35) Post the general journal below to the appropriate T-accounts. You need not fill in the PR column below.


1/11 Cash 21,500

Common shares 21,500

2/3 Furniture 2,900

Cash 2,900


Cash 2,250

3/9 Office Fixtures 2,300

Stock Bins 6,200

Cash 7,000


3/12 Cash 575


Cash 101

Accounts Receivable

104 Prepaid Rent 107 Computers 109

Stock Bins 110 Carpeting 114 Office Desks 119 Furniture 123

Office Fixtures 144 Accounts Payable 204 Wages Payable 222 Common Shares 301

Wages Expense 511 Rent Expense 512 Wages Exp. 511


32


Answer:

Cash 101

Accounts Receivable


21,500

575

2,900

2,250

7,000 575 2,250


6,200

2,900


2,300 1,500

21,500

Wages Expense 511 Rent Expense 512 Wages Exp. 511

Diff: 3 Type: ES



Blooms: Analysis



33


36) Post the following general journal to the T-accounts provided below.


1/23 Cash 25,000

Common shares 25,000

2/7 Computers 7,500

Account payable 7,500

2/19 Rent expense 900

Cash 900

3/9 Furniture 2,550

Carpeting 1,000

Cash 3,550

3/12 Wages expense 1,200

Wages payable 1,200

Cash 101

Accounts Receivable




Wages Expense 511 Rent Expense 512


34


Answer:

Cash 101

Accounts Receivable


25,000

900

3,550 7,500


1,000

2,550


7,500 1,200 25,000

Rent Expense 512 Wages Expense 511

900

1200

Diff: 3 Type: ES



Blooms: Analysis



35


37) Post the following transactions to T-accounts.


1/9 Cash 33,000


2/14 Furniture 6,300



Cash 4,500

3/9 Office Desks 5,300

Computers 9,000

Cash 14,300

3/19 Wages Expense 1,400

Wages Payable 1,400

Cash 101

Accounts Receivable


Inventory 110 Carpeting 114 Office Desks 119 Furniture 123




36


Answer:

Cash 101

Accounts Receivable


33,000

4,500

14,300 4,500 9,000

Inventory 110 Carpeting 114 Office Desks 119 Furniture 123

5,300 6,300


6,300 1,400 33,000


1,400

Diff: 3 Type: ES



Blooms: Analysis



37


38) Fire Alarm Services completed the following transactions in the month of March.

Mar. 1. Purchased fire monitoring equipment for $18,000 for cash.

2. Purchased response vehicle costing $25,000 for $4,500 cash and the remainder on account.

3. Purchased supplies on account for $800.

14. Paid $3,000 for a one-year insurance policy.

15. Received $2,000 cash for services performed.

16. Received $4,000 for services previously performed on account.

20. Paid wages to employees for $2,500.

28. Paid $500 in dividends to shareholders.

Requirements

Journalize each transaction and identify each transaction by date. Explanations not required.

Answer:

Mar. 1 Equipment 18,000

Cash 18,000

2 Equipment 25,000

Cash 4,500


3 Supplies 800



Cash 3,000

15 Cash 2,000


16 Cash 4,000


20 Wages Expense 2,500

Cash 2,500

28 Dividends 500

Cash 500

Diff: 2 Type: ES


Skills: Application

Blooms: Application



38


2.4 Use a trial balance to prepare financial statements

1) A trial balance is a list of the accounts and their balances taken from the general journal.

Answer: FALSE

Diff: 1 Type: TF

LO: 2-4 Use a trial balance to prepare financial statements

Skills: Recall

Blooms: Knowledge


2) A trial balance contains the name of the company, the words "trial balance," and the date of the statement.

Answer: TRUE

Diff: 1 Type: TF


Skills: Recall

Blooms: Knowledge


3) The required accounting period for a trial balance is one year.

Answer: FALSE

Diff: 1 Type: TF


Skills: Recall

Blooms: Knowledge


4) Once the trial balance is correct, the next step is to prepare the financial statements, beginning with the

income statement.

Answer: TRUE

Diff: 1 Type: TF


Skills: Recall

Blooms: Knowledge


5) If debits equal credits on the trial balance, it means that the trial balance is correct.

Answer: FALSE

Diff: 1 Type: TF


Skills: Recall

Blooms: Knowledge


6) An entry could have been posted twice and the trial balance might still balance.

Answer: TRUE

Diff: 1 Type: TF


Skills: Recall


39


Blooms: Knowledge


7) A trial balance will determine if:

A) an entry was recorded twice.

B) an entry was posted twice.

C) debits equal credits.

D) the right accounts were debited or credited.

E) all entries are correct.

Answer: C

Diff: 1 Type: MC


Skills: Concept



8) The trial balance:

A) lists only the accounts which are used to prepare the balance sheet.

B) shows only credit balances.

C) shows only debit balances.

D) shows the current date.

E) lists only the accounts which are used to prepare the income statement.

Answer: D

Diff: 2 Type: MC


Skills: Concept



9) The columns on a trial balance represent __________.

Answer: debits and credits.

Diff: 1 Type: ES


Skills: Recall

Blooms: Knowledge


10) A cash payment was made to pay for delivery expenses, but was mistakenly charged to advertising

expenses. What effect will this have on the balance of the trial balance?

Answer: The trial balance will still balance. The account balances will be incorrect.

Diff: 2 Type: ES


Skills: Application

Blooms: Application


11) On the trial balance, which should have their balances listed in the debit column?

Answer: Assets, dividends, and expenses.


40


Diff: 2 Type: ES


Skills: Concept



12) On the trial balance, which should have their balances listed in the credit column?

Answer: Liabilities, retained earnings, and revenues.

Diff: 2 Type: ES


Skills: Concept



13) Only the __________ and __________accounts from the trial balance will be used to prepare the income

statement.

Answer: revenue; expense

Diff: 2 Type: SA


Skills: Concept



14) Which would be best at proving the accounts balance?

Answer: Trial balance

Diff: 2 Type: SA


Skills: Concept




41


15) Emily Ma started an Energy Saving Service in June 2013. The account balances on June 30, 2013 are

provided below. All accounts have normal balances. One hundred (100) common shares were issued in June

2013.

Office Supplies 300

Utilities Expense 1,000

Equipment Rental Expense 1,500

Office Equipment 2,000

Automobile Expense 4,000

Travel Expense 4,000


Wages Expense 5,000



Cash 12,000

Notes Payable 24,000

Building 25,000

Energy Assessment Equipment 25,000

Dividends 30,000


Requirements

Prepare a trial balance using the correct financial presentation.

Answer: Emily's Energy Saving Service

Trial Balance

June 30, 2013

Debit Credit

Cash $12,000


Office Supplies 300


Energy Assessment

Equipment 25,000

Building 25,000

Accounts Payable $6,100



Dividends 30,000





Wages Expense 5,000


Totals $114,300 $114,300


42


Diff: 3 Type: ES


Skills: Application

Blooms: Application


16) Prepare a trial balance from the following information for Learn a New Language, Inc. for December 31,

2013.


Common Shares $9,692

Cash $3,928

Notes Payable $1,439

Wages Expense $777

Marketing Expense $493

Equipment $8,345

Accounts Receivable $1,142

Inventory $8,074

Sales $6,616

Answer: Learn a New Language Inc.

Trial Balance

December 31, 2013

Cash $3,928


Inventory 8,074

Equipment 8,345


Notes Payable 1,439

Common Shares 9,692

Sales 6,616

Marketing Expense 493

Wages Expense 777 ______

TOTALS $22,759 $22,759

Diff: 3 Type: ES


Skills: Application

Blooms: Application



43


17) Prepare a trial balance from the following information for Computer Systems, Inc. for December 31, 2012.



Sales $8,302

Cash $1,902

Notes Payable $888

Wages Expense $777

Supplies Expense $1,028

Equipment $5,183


Inventory $6,938

Answer: Computer Systems, Inc.

Trial Balance

December 31, 2012

Cash $1,902


Inventory 6,938

Equipment 5,183


Notes Payable 888

Common Shares 4,073

Sales 8,302

Supplies Expense 1,028

Wages Expense 777

_______ ______

TOTALS $17,561 $17,561

Diff: 3 Type: ES


Skills: Application

Blooms: Application



44


18) Prepare a trial balance from the following information for Alpha Systems, Inc. for December 31, 2012.



Sales $8,348

Cash $2,602

Notes Payable $1,465

Travel Expense $2,006

Rent Expense $1,305

Computers $4,064


Inventory $7,318

Answer: Alpha Systems, Inc.

Trial Balance

December 31, 2012

Cash $2,602


Computers 4,064

Inventory 7,318


Notes Payable 1,465

Common Shares 5,521

Sales 8,348

Rent Expense 1,305


_______ _______

TOTALS $18,579 $18,579

Diff: 3 Type: ES


Skills: Application

Blooms: Application



45




2013.

Office Supplies 300







Wages Expense 5,000



Cash 12,000


Building 25,000


Dividends 30,000


Requirements

Prepare Emily's statement of financial position for June 30, 2013.

Answer: Emily's Energy Saving Service

Statement of Financial Position

As of June 30, 2013

ASSETS

Cash $12,000


Office Supplies 300



Building 25,000

Total Assets $68,800

LIABILITIES



Total Liabilities 30,100

SHAREHOLDERS’ EQUITY


Retained Earnings 28,700

Total Shareholders’ Equity 38,700

Total Liabilities and Shareholders’

Equity $68,800


46


Diff: 3 Type: ES


Skills: Application

Blooms: Application


20) Emily Ma started Energy Saving Service in June 2013. The account balances on June 30, 2013 are provided

below. All accounts have normal balances. One hundred (100) common shares were issued in June 2013.

Office Supplies 300







Wages Expense 5,000



Cash 12,000


Building 25,000

Energy Assessment

Equipment 25,000

Dividends 30,000


Requirements

Prepare Emily's statement of changes in equity for June 30, 2013.

Answer:

Emily’s Energy Saving Service

Statement of Changes in Equity

Month Ended June 30, 2013

Number of

Common

Shares

$Common

Shares

Retained

Earnings Total

Balance June 1, 2013 $0 $0 $0

Issued Common Shares 100 10,000 -- 10,000

Net Income 58,700 58,700

Dividends (30,000) (30,000)

Balance June 30, 2013 100 $10,000 $28,700 $38,700

Diff: 3 Type: ES


Skills: Application

Blooms: Application



47


21) Phillip started his physiotherapy business in March 2013. Phillip’s physiotherapy clinic for March 31, 2013

is provided below. All accounts have normal balances. Phillip issued sixty-three (63) common shares in

March.



Building 51,000

Cash 2,400


Dividends 10,500

Exercise Equipment 18,900



Office Supplies 300

Rent Expense 1,500

Physiotherapy Revenue 32,500


Wages Expense 5,000

Weight Equipment 22,000

Requirements

Part A Prepare a trial balance using the correct financial presentation. Remember to include the correct

headings.

Part B Prepare an income statement for March 2013.

Part C Prepare a statement of changes in equity for March 2013.

Part D Prepare a statement of financial position for March 2013.


48


Answer:

Part A

Phillip’s Physiotherapy Clinic’s

Trial Balance

March 31, 2013

Debit Credit

Cash $12,400


Office Supplies 300




Building 51,000




Dividends 10,500

Physiotherapy Revenue 32,500

Rent Expense 1,500


Wages Expense 5,000

Totals $125,700 $125,700

Part B


Income Statement

Month Ended March 31, 2013

Revenue

Physiotherapy

Revenue $32,500

Expenses

Rent Expense $1,500


Wages Expense 5,000

Total

Expenses 7,500

Net Income $25,000


49


Part C


Statement of Changes in Equity

Month Ended March 31, 2013

Number of

Common

Shares

$Common

Shares

Retained

Earnings Total

Balance March 1st , 2013 $0 $0 $0

Issued Common Shares 63 $63,000 -- 63,000

Net Income $25,000 25,000

Dividends ___ ______ (10,500) (10,500)

Balance March 31st , 201 63 $63,000 $14,500 $77,500

Part D


Statement of Financial Position

As of March 31, 2013

ASSETS

Cash $12,400


Office Supplies 300




Building 51,000

Total Assets $107,700

LIABILITIES



Total Liabilities 30,200

SHAREHOLDERS’ EQUITY



Total Shareholders’ Equity 77,500

Total Liabilities and Shareholders’

Equity $107,700

Diff: 3 Type: ES

LO: 2-3 & 2-4

Skills: Application

Blooms: Application



50




2013.

Office Supplies 300







Wages Expense 5,000



Cash 12,000


Building 25,000

Energy Assessment

Equipment 25,000

Dividends 30,000


Requirements

Prepare Emily's income statement.

Answer: Emily’s Energy Saving Service

Income Statement

Month Ended June 30, 2013

Revenue

Service Revenue $74,200

Expenses

Equipment Rental Expense $1,500



Wages Expense 5,000


Total

Expenses 15,500

Net Income $58,700

Diff: 3 Type: ES


Skills: Application

Blooms: Application



51


23) Magic Music DJ Service is a DJ Service in Ottawa providing music for weddings and private parties. The

account balances at December 31, 2013 are below.



Automobiles 28,500

Cash 18,500

Computer Hardware 29,000


Dividends 40,000

DJ Equipment 35,400

Fees Earned 105,000

Music Supplies 800

Music Library 4,200


Notes Receivable 19,100

Rent Expense 11,000

Salaries Expense 26,000

Requirements

Prepare a trial balance in proper accounting format.

Answer: MAGIC MOMENTS D.J. SERVICES

Trial Balance

December 31, 2013

Debit Credit

Cash $18,500


Notes Receivable 19,100

Music Supplies 800

Computer Hardware 29,000

Office Furniture 35,400

Music Library 4,200

Automobiles 28,500




Dividends 40,000

Fees Earned 105,000

Rent Expense 11,000

Salaries Expense 26,000

Totals $238,500 $238,500

Diff: 2 Type: ES


Skills: Application

Blooms: Application


52



24) The general ledger accounts for Corey’s Candle Company for the month of January 2013 are shown below.

All accounts have normal balances.



Building 51,400


Cash 22,500

Wax Melting Equipment 18,900

Candle Moulding Equipment 23,000


Office Supplies 350


Requirements

Prepare a trial balance with the general ledger accounts in the proper financial statement order.

Answer: Corey’s Candle Company

Trial Balance

January 31,2013

Debit Credit

Cash $22,500


Office Supplies 350


Wax Melting Equipment 18,900

Candle Moulding Equipment 23,000

Building 51,400




Totals $118,200 $118,200

Diff: 3 Type: ES


Skills: Application

Blooms: Application



53


25) There are eight steps in the accounting cycle. List and describe the eight steps.

Answer:

1. Analyze and journalize transaction.

2. Post transaction to the general ledger.

3. Prepare an unadjusted trial balance.

4. Journalize and post the adjusting entries.

5. Prepare an adjusted trial balance.

6. Prepare the financial statements.

7. Journalize and post the closing entries.

8. Prepare a post-closing trial balance.

Diff: 2 Type: ES


Skills: Concept



26) Taylor's trial balance contains the following balances:

Cash $367 Accounts payable $267 Revenue $632

Accounts receivable $429 Expenses $103

What is the total for the trial balance?

Answer: $899

Debit Credit

Cash $367


Accounts Payable $267

Revenue 632

Expenses 103 ____

$899 $899

Diff: 3 Type: ES


Skills: Concept




54


27) The Fireworks Company has the following T- accounts their transactions for July 2013 are included below.

Requirements

(a) For each transaction, journalize the transaction, including an explanation for the entry.

(b) Determine the ending account balance for each account.

(c) Prepare a trial balance as at July 2013.

Answer:

Part a

1. Cash 1,000

Revenue 1,000

Cash Sales for Fireworks sold during July 2013

2.

Equipment 13,500

Cash 3,500


Purchased firework equipment for cash and accounts payable.

3. Supplies 1,950

Cash 1,950

Purchased supplies for cash

4. Salaries Expense 2,225

Cash 2,225

Paid salaries to employees.

5. Accounts Receivable 27,500

Revenue 27,500

Issued invoices for firework displays conducted in July.


55


6. Accounts Payable 8,000

Cash 8,000

Made partial payment on accounts payable.

7. Cash 22,500


Collections from customers.

Part b

Part c

The Fireworks Company

Trial Balance

July 31,2013

Debit Credit

Cash $11,825


Supplies 1,950

Equipment 13,500



Revenue 28,500

Salaries Expenses 2,225

Total $35,000 $35,000

Diff: 3 Type: ES


Skills: Application


56


Blooms: Application


2.5 Cumulative Questions

1) Complete the chart below.

For each of the general ledger accounts, identify:

a) the type of account (Asset, Liability, Shareholders Equity, Revenue, or Expense)

b) the effect of an increase (debit or credit)

c) the normal account balance

Account (a) Type of Account (b) Debit or Credit (c) Normal Balance

Cash

Accounts Receivable

Accounts Payable

Notes Payable

Notes Receivable

Common Shares

Sales

Travel Expense

Supplies

Answer:

Account Type of Account Debit or Credit Normal Balance

Cash Asset Debit Debit

Accounts Receivable Asset Debit Debit

Accounts Payable Liability Credit Credit

Notes Payable Liability Credit Credit

Notes Receivable Asset Debit Debit

Common Shares Shareholders' Equity Credit Credit

Sales Revenue Credit Credit

Travel Expense Expense Debit Debit

Supplies Asset Debit Debit

Diff: 3 Type: ES

LO: 1-4, 2-1

Skills: Application

Blooms: Application



57


2) For each of the following general ledger accounts identify:

(a) the type of account (Asset, Liability, Shareholders Equity, Revenue, Expense),

(b) the debit and credit effects, and

(c) the normal account balance.

Accounts

1. Notes Payable

2. Accounts Receivable

3. Common Shares

4. Dividends

5. Service Revenue

6. Advertising Expense

7. Mortgage Payable

8. Equipment

9. Accounts Payable

10. Supplies

Answer:

1. a. Liability account. 6 a. Revenue account.

b. Debit decreases, credit increases. b. Debit decreases, credit increases.

c. Normal balance - credit. c. Normal balance - credit.

2. a. Asset account. 7. a. Expense account.

b. Debit increases, credit decreases. b. Debit increases, credit decreases.

c. Normal balance - debit. c. Normal balance — debit.

3. a. Shareholders' Equity 8. a. Liability account.

b. Debit decreases, credit increases. b. Debit decreases, credit increases.

c. Normal balance - credit. c. Normal balance - credit.

4. a. Shareholders' Equity 9. a. Asset account.

b. Debit increases, credit decreases. b. Debit increases, credit decreases.

c. Normal balance - debit. c. Normal balance - debit.

5. a. Liability account 10. a. Asset account

b. Debit decreases, credit increases. b. Debit increases, credit decrease

c. Normal balance - credit c. Normal balance - debt

Diff: 3 Type: ES

LO: 1-4, 2-1

Skills: Application

Blooms: Analysis



58


3) The June 2013 general journal for Have A Nap Hotel Company is provided below.

General Journal

Date

Account Titles and

Explanation Debit Credit

June 1 Cash 25,000

Shares 25,000

Issue Shares for Have

A Nap Hotel’s.

4 Furniture and Fixtures

Cash 10,000


Purchased furniture &

fixtures paid cash and

issued 2-year, 6%

note payable

8 Rent Expense 1,000

Cash 1,000

Paid June rent.


Cash 1,400

Paid one-year liability

insurance.

18 Cash 2,500

Revenue 2,500

Received cash for

room rentals.

20 Wages Expense 450

Cash 450

Paid salaries for June.

25 Utility Expense 150


Received a bill for

June utilities.

30 Dividends 750

Cash 750

Paid dividends to

shareholders


59


30 Accounts Receivable 1,000

Revenue 1,000

Billed customer for

party room rental.

Requirements:

a. Identify the accounting equation for each transaction in the chart provided below.

Assets Liabilities Shareholders' Equity

Example: June 1 25,000 25,000

June 4

June 8

June 15

June 18

June 20

June 25

June 30

June 30

b. Use T-accounts to post the journal entries to the accounts in the general ledger.

c. Prepare a trial balance for June 2013.

Answer:

Part a.

Assets Liabilities Shareholders’ Equity

Example:

June 1 +25,000 +25,000

June 4 +40,000-10,000 +30,000

June 8 -1,000 -1,000

June 15 +1,400-1,400

June 18 +2,500 +2,500

June 20 -450 -450

June 25 +150 -150

June 30 -750 -750

June 30 +1,000 +1,000


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Part b. T-accounts

Part c Trial Balance

Have A Nap Hotel Service

Trial Balance

June 30, 2013

Accounts Debit Credit

Cash $13,900

Accounts receivable 1,000

Prepaid insurance 1,400

Furniture and Fixtures 40,000

Accounts payable $150

Notes payable 30,000


Dividends 750

Room Revenue 3,500

Rent expense 1,000

Wages expense 450

Utility expense 150

Total $58,650 $58,650


61


Diff: 3 Type: ES

LO: 1-4, 2-3, 2-4

Skills: Application

Blooms: Analysis


Financial Accounting (Waybright) Chapter 2 Analyzing … 2 Analyzing and Recording Business...

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Transcript of Financial Accounting (Waybright) Chapter 2 Analyzing … 2 Analyzing and Recording Business...